Is your business going to be forced to charge VAT

So with the Government staring up at the 1.8 trillion pounds of debt they have accumulated by subsidising big companies to pay the minimum wage and financing juggling lessons in Africa, they have decided that something needs to be done, and who better to pay for this fiscal folly than the good old self employed. After all, why should those small businesses turning over less than 85K get away with not collecting VAT, free of charge for the government? Yes that’s right, the government are looking to lower the VAT threshold, possibly to as low as 20k. About 45k is more probable, but it still means that the UK’s fledgling businesses are going to have to become VAT registered, should they go ahead. So to the uninitiated, what would this mean in practical terms? Well basically if you charge a customer £200 to do a job, you will have to charge them £240 and give the extra £40 to HMRC. That’s if you want to pass the charge on to the customer. Alternatively, if you think that the customer will say no to the price increase you can pay the VAT yourself. That means that you charge the customer £200 and then give HMRC 20% of that ie £33.33. So for a job that you were getting £200 for, you now get £166.66. Nice. Just what struggling small businesses need. Mind you, if you are a big business there will be no more being undercut by small businesses, all the balls are now in your court, especially if your corporation tax is paid offshore.